January has seen Brexit set in motion for real — but for many businesses, operations have ground to a standstill as they struggle to shift goods across new borders.
With the UK now outside the EU”s Single Market and Customs Union, importers and exporters on both sides of the English Channel say the new rules have brought a nightmare of red tape and extra costs.
Paperwork and border checks have led to seafood being left stranded in ports, and empty shelves in some supermarkets as deliveries failed to materialise.
Supplies from Great Britain to Northern Ireland have also been hit as the need to keep an open land border on the island of Ireland means the North is largely following EU rules.
The UK government has attributed much of the chaos to “teething problems”, arguing the longer term will bring great opportunities. But some trade experts say some of the new burdens on business are here to stay.
The nature and scale of the problem is illustrated by this selection of some of the hassles reported by traders:
- “My regular logistics partner has suspended their service completely from the EU to the UK until February. These guys operate in 31 countries & know how to move stock quickly, but the paperwork nightmare is just too much for them” — Daniel Lambert (Wines), wine import company, Bridgend, Wales. He wrote a 22-point Twitter thread detailing problems encountered.
- “It’s not good. This situation, for me it’s too much paperwork, too much wait, wait, all the time is wait. This is not good.” — UK-based Polish lorry driver Petar Loba, stuck in a queue near Dover.
- “A shipment that used to cost £95 (€107) and take five minutes to organise will now take an afternoon and cost £400 (€452)” — Richard Townsend of Bailey Paints, a small business which exports paint from Stroud in England to Ireland.
- “We can’t get deliveries you know. Companies are taking orders and then they’re ringing us back going, ‘we can’t deliver that until further notice’.” — Kieran Sloan of Sawers delicatessen in Belfast, on supply problems from Britain.
- “The first days were difficult, there were a great deal of delays. Some of our drivers had to wait a week on the British side to make export declarations… (There were) customers who’d declared nothing, those who’d made admin mistakes… queues to obtain documents in England.” — Benoît Lefebvre of French firm Sonotri, on transporting chemical products to England.
- “All the EU (countries) that used to buy a lot of our fish, they’ve kind of stopped because the fish that were getting transferred were going off, going bad. So we’ve lost our entire export market.” — Ben Vass, fisherman, Devon, England.
- “80% of our sales get shipped to the EU, so obviously now it’s all stopped. Our prices have dropped. All our fish is getting frozen.” — Nathan Daley, fisherman, Devon, England.
- “We have had to completely suspend the sending of all our consumer parcels to the EU. We had a bounce-back of every single parcel that we sent from 4th January onwards… It’s because you now need a health certificate even for a consumer parcel. The cost of a health certificate is £180 (€203) per consignment.” — Simon Spurrell, Cheshire Cheese Company.
- “A customer… had to pay over 50% of what his overall parcel was worth to get it out of customs and we had to send him a VAT invoice… It’s been horrible and it’s almost gotten to the point where we’ll have to probably stop trading with the EU, which is going to cost us thousands of pounds over the next three months.” — Joycelyn Mate of Afrocenchix, exporting afro hair products from the UK.
Why are traders suffering like this?
The Brexit trade deal struck on Christmas Eve was celebrated as a great success. It certainly brought huge relief, avoiding an even more chaotic no-deal scenario with just days to spare.
The agreement means trade can continue between the UK and the EU, free of tariffs (import taxes) and quotas.
Boris Johnson has claimed, wrongly, that there are no non-tariff barriers. The reality is — as seen by the above examples — is that the new trading regime has brought a mountain of extra bureaucracy and costs.
Firms now need to fill out customs declarations. The process involving codes and new IT systems can lead to significant delays. Slower procedures mean higher costs. There are also new regulatory checks for food, with meat, dairy and fish products needing health certificates.
There is a risk that supplies get stuck. Under the “groupage” system, multiple consignments often travel in one trailer. But all may need to be checked, and problems or mistakes can hold up the whole shipment.
There are also complications over “rules of origin” regulations, and VAT (Value Added Tax), as the UK is no longer part of the EU’s VAT area. EU exporters sending goods to the UK have to register with UK authorities and may have to pay UK import VAT. VAT and excise duties are also due on goods entering the EU from the UK.
Some changes have been unexpected. Ireland, for instance, has discovered that it has been sometimes hit by EU import duties. Despite the no-tariff Brexit deal, there is no exemption if goods pass through Britain on their way to or from the continent, as they are no longer considered to be of EU origin.
The European Commission warned last July of significant border disruption from the end of the transition period, regardless of whether a trade deal was agreed.
What have industry bodies been saying?
The UK’s Road Haulage Association says so worried are exporters over customs demands or the danger of getting stuck in port — not to mention the additional burden of COVID-19 tests for drivers — that many are not sending at all.
The RHA has reported that at least 40% of lorries bringing goods from the EU to Britain are returning to the continent empty, which has a “huge impact on the supply chain”.
The British Meat Processors Association has said the post-Brexit problems “are now causing a serious and sustained loss of trade with our biggest export partner”.
“If continental supermarkets are unable to have products delivered the way they need them to be, this trade will simply be lost as EU customers abandon UK suppliers and source product from European processors,” said Nick Allen, BMPA’s Chief Executive.
“Members are already being told by their EU customers that they’ll be looking to Spain and Ireland to buy products from now on.”
The fishing industry, whose produce is equally highly perishable, has echoed such complaints. The Scottish seafood industry in particular has been sounding the alarm.
So are these just ‘teething troubles’?
The UK government has said it is responsive to traders’ immediate difficulties while promoting a more rosy picture for the longer term.
“Of course there are there are teething problems in lots of areas and that’s inevitable because this is a big change,” Boris Johnson said on a trip to Scotland, in relation to the fishing industry.
“But be in no doubt, over the medium term and much more over the long term, the changes are very, very beneficial for Scottish fishing,” the prime minister added.
George Riddell, a former UK trade official and Director of Trade Strategy at the consultants EY, says some of the new systems and formalities are indeed teething problems, but some are not.
“First, many businesses are facing the largest shift in their cost base in a generation,” he wrote on Twitter, highlighting customs and IT demands, and other costs linked to immigration and the need for some to set up a European base.
“The question they’re going to be asking themselves — are their operations still profitable?”
The second area Riddell said related to rules of origin and sourcing of goods, which could force companies to alter the way they operate. “Supply chains are going to shift as a result and is deeply complex,” he added.
“Some firms will get used to the paperwork, deal with it, absorb the additional costs and keep on trading,” said Anand Menon, Director of The UK in a Changing Europe think-tank. But, he added, other firms “might struggle more because of the administrative load that’s placed upon them.”
So what is the path ahead?
The UK government has said businesses were warned of the changes in advance, with publicity campaigns and information on official websites.
But many companies say they were aware of the changes and made all the plans they could, yet have still encountered serious problems.
A common complaint is that uncertainty continued until almost the last minute, with the Brexit deal struck so late. Another is that new systems were developed late. A detailed update giving business advice on the changes was published on New Year’s Eve, hours before the changes kicked in.
Some UK companies have set up subsidiaries in the EU to be able to sell into the Single Market. But this is not an option for many.
The UK government has promised a £23 million (€26 million) compensation fund for the fishing industry. A joint ministerial task force is also being set up to identify blockages, reduce paperwork and improve operations at ports.
The full extent of the new trading world has not yet been felt, warns George Riddell of EY, pointing out that more changes are on the way.
“What we have in the trading relationship today is not the end-state of trade between the UK and EU. In some ways it’s going to get worse, as grace-periods and transitions end,” he writes. “On the other hand, there are areas where the UK and EU are meant to deepen cooperation.”
“What that means is businesses are going to need to stay on top of all of these changes and disruptions in the coming months and years.”
“We shouldn’t kid ourselves, that Brexit means trade will continue as it did before. It won’t. It will change and it might change in some profound ways,” concludes Anand Menon of The UK in a Changing Europe.
